London Councils’ response to the Mayor’s draft London Housing Strategy

London Councils is committed to fighting for more resources for the capital and getting the best possible deal for London’s 33 local authorities. We lobby key stakeholders, develop policy and do all we can to help our boroughs improve the services they deliver. We also run a range of services ourselves, all designed to make life better for Londoners.

London Councils’ Members sit on the Homes and Communities Agency London Board overseeing the Homes and Communities Agency’s investment strategy in London and the delivery of some aspects of the Mayor’s Housing Strategy.

Summary

Following discussion at London Councils’ Executive, Housing Forum and London Councils’ Housing Directors Group the following paper sets out our response to the Mayor’s draft London Housing Strategy. For ease of reference, we have focused our response on three areas: delivery, devolution and design. Our key proposals on each are as follows:

Delivery

- A short review of the current effectiveness of the Homes and Communities Agency London Board;

- The Mayor commits to a review of London borough affordable housing targets as delivery becomes apparent;

- That the Greater London Authority works with us to develop a coherent plan of action so as to encourage the growth of institutional investment in London and to make best use of work already being undertaken by the Homes and Communities Agency;

- The Greater London Authority works with London Councils to develop a pan-London shared-equity scheme, to sit along side other elements of the Mayor’s First Steps programme;

- The Greater London Authority works with London Councils and London boroughs to oversee and manage the rollout of the London Development Agency’s proposed London-wide Housing Company.

Devolution

- The Greater London Authority works with the Homes and Communities Agency and London boroughs to establish a ‘Devolution Commission’ on housing investment and governance which would explore a potential model for devolution in the capital;

- The Greater London Authority works closely with London Councils in developing an approach to the rationalisation of the housing association sector; • The Greater London Authority works with London Councils to develop an appropriate strategy to tackle the likelihood that not all local authorities will be able to meet Government’s target to halve the use of temporary accommodation by 2010.

Design

• The principles of the Mayor’s Design Guide be adopted generally, but that provision be created for exceptional instances where aspects might be waived for particular developments of a certain scale;

• The Greater London Authority commit to working with London boroughs on developing a costed successor standard to the Decent Homes standard.

Introduction

1. Housing policy shapes the political and economic contours of the capital like no other public sector intervention: levels of worklessness, educational attainment, quality of life, levels of democratic engagement and business competitiveness are all influenced by people being able to access stable, secure and suitable accommodation, be it through owning their own homes or renting in the private or social sectors.

2. Delivering these homes, however, is proving to be an exceptionally challenging task. Even before the current economic crisis, London struggled to meet the housing needs of Londoners, with nearly 50,000 households still in temporary accommodation and 350,000 households on London borough waiting lists. Similarly, outside the social rented sector, first time buyers have seen themselves increasingly frozen out of the market as the ratio of household incomes to house prices has soared and access to mortgage finance has dried up.

3. London Councils firmly believes that London local government, the boroughs working with the Mayor and the Greater London Authority, have a crucial responsibility to tackle these challenges, to work together to deliver the homes London so desperately needs. Recent developments have also underlined the need to provide people with a genuine choice, with opportunities to access homes that meet a wide variety of needs, across a range of tenures, but without compromising on standards.

4. The Mayor’s draft London Housing Strategy, goes a long way to establishing a coherent, well thought-out vision for delivering housing across London. On the whole, the Strategy is to be welcomed and London Councils is keen to stress its commitment to working with the Greater London Authority for the benefit of London’s communities.

5. As such, we have focused our response on those areas where we feel that the boroughs and London Councils has a particular role to play and where we believe the Mayor’s proposals would benefit from further discussion and engagement. These are: delivery, devolution and design. Within each area we have set out the specific topics we are most concerned with and proposed a way forward. Delivery

Arrangements of the Homes and Communities Agency London Board

6. The Homes and Communities Agency London Board, Chaired by the Mayor and attended by three Borough Leaders is the key mechanism for approving the allocation of approximately £3.5 billion of National Affordable Housing Programme resources in London and the driving force behind the effective implementation of many innovative housing market interventions. Since its inception in December 2008, not only has the role of the public sector in delivering more affordable housing proved to be more crucial than ever, but the need for a strong, representative board, one legitimately able to make the case on behalf of London has been underlined.

7. Clearly, there is much to be proud of: London Councils and the Greater London Authority's joint efforts to secure the return of £268 million of Growth Support Affordable Housing Funds; the co-ordinated response both organisations developed in light of Government's recent decision to potentially delay decent homes funding to local authority Arms Length Management Organisations yet to achieve two stars. However, with market conditions affecting housing supply over the next year likely to be exceptionally turbulent, we feel that London would benefit from efforts to ensure that the board is best-placed to deal with these challenges.

| London Councils proposes that the Greater London Authority, working with the Homes and Communities Agency and London boroughs undertakes a short review of the current effectiveness of the Homes and Communities Agency London Board. This review could consider decision-making processes and officer support. Ideally, it should be concluded before the end of 2009. |

Affordable Housing Targets

08. The Mayor’s decision to step-back from the requirement that 50 per cent of all new housing developments be affordable and instead adopt an overall target for London of 50,000 affordable homes for the period 2008-11 has attracted a range of views, but is cautiously welcomed. London desperately needs more affordable housing and to the extent that the removal of the 50 per cent target potentially encourages greater levels of delivery and a more collegiate relationship between the Mayor and London's boroughs, we are keen to endorse these arrangements.

09. However, we are concerned at the degree of progress in negotiating these targets and by the possibility that both economic conditions and national policy decisions may place undue pressure on boroughs to achieve targets set within a markedly different context.

10. The recent announcement by the Homes and Communities Agency to lower projections relating to the number of affordable homes to be delivered from National Affordable Housing Programme resources for the period 2008-11, from 44,000 to 37,000 serves as useful illustration in this regard. New homes can only be built if there are sufficient resources to do so. With increased levels of grant required to facilitate delivery through housing associations, it necessarily follows that, all else being equal, for a given level of resources the number of homes which can be delivered decreases.

11. The Government’s review of council housing finance potentially paves the way for local authorities to build directly if they choose, to lever in additional resources from locally raised rental income. It is therefore possible that a recovered housing market, in combination with extra resources from Government will allow London boroughs to make significant progress towards achieving the Mayor’s aim. However, to ensure that this shared goal of meeting London’s affordable housing needs is supported effectively, we believe a degree of ongoing evaluation would be appropriate; to identify where there are barriers and where additional resources and flexibility might be appropriate.

London Councils proposes that the Mayor should commit to a review of affordable housing targets, as delivery becomes apparent. The review should be based on a comprehensive appraisal of relevant macro-economic factors and should be underpinned by a robust assessment of borough demand, capacity and engagement.

Institutional Investment in the Private Rented Sector

12. With the highest house prices in the country, the highest levels of homelessness and overcrowding, a good quality, viable affordable private rented sector is a fundamental pre-requisite in enabling the London boroughs to address housing need, prevent homelessness and promote choice whilst supporting flexibility in the employment market.

13. In 2009, 20 per cent of London households privately rent their home and whilst the percentage of home owners has shrunk over the past three years, the number of renters has increased by over 22 per cent over the same period.

14. Consequently, due to the strategic importance of the private rented sector to London’s wider ‘housing offer’ and the capital’s economic well-being, London Councils welcomes the Mayors aims to support the sector with the underlying objective of maintaining choice and sectoral flexibility. In particular, we welcome recognition of the need to engage with institutional investors and to explore the role new sources of finance capital might play in helping expand and improve private rented sector provision.

15. London Councils believes that a more extensive, professionally managed, private rented sector has an important part to play in providing Londoners with different needs and at different points in their lives with a greater degree of choice and flexibility. Whilst owner occupation remains, for many, the tenure of choice, it is important to recognise that it is not a destination all can reach due to a variety of economic and other factors.

16. Mindful of the Homes and Communities Agency’s Private Rented Sector Initiative, London Councils is in the process of commissioning a piece of research which will set out the case for institutional investment in London and establish the key role local authorities might play in unlocking returns in this sector.

London Councils proposes that the Greater London Authority works with us to develop a coherent plan of action so as to encourage the growth of institutional investment in London and to make best use of work already being undertaken by the Homes and Communities Agency. Intermediate Housing

17. In proposing that 40 per cent of all new affordable homes delivered in the period 2008-11 will be intermediate rather than social rented, London Councils feels that the Mayor is making a contribution to addressing concerns regarding the residualisation of social housing and taking a positive step towards providing affordable housing that acts a ‘ladder of opportunity’. Similarly, the Mayor’s support for London Councils’ demands for a variation in the level of stamp duty relief and the decision to increase the level of household income at which buyers are eligible for intermediate housing products are to be welcomed.

18. As such, we have watched with interest the launch of the Mayor’s First Steps scheme and wider efforts to expand the use of shared ownership products. Our understanding is that these undertakings have enjoyed some degree of success, but that the market remains relatively confused as to the nature of shared ownership and financial institutions continue to treat such products as ‘sub-prime’, preferring instead, the use of shared-equity.

19. Evidence to the Communities and Local Government Select Committee from the Council of Mortgage Lenders supports this preference for shared equity. However, Government has recently closed to new applicants one of the most successful shared-equity schemes, ‘Open Market Homebuy’, leaving what is potentially a significant opportunity for London local government to work together and meet unmet demand.

London Councils proposes that the Greater London Authority works with London boroughs and the Homes and Communities Agency to develop a pan-London shared-equity scheme, which would sit alongside other elements of the Mayor’s First Steps programme. We also propose to continue lobbying Government for appropriate regional variations in stamp duty and national housing market interventions such as the mortgage rescue scheme.

London Development Agency Housing Company

20. The possibility of a pan-London Housing Company, developed and managed by the London Development Agency, raises the prospect not only of increased economies of scale and co-ordination, but also of a coherent partnership approach to delivery, which will likely have positive implications for the future devolution of housing investment decisions to a local borough level.

21. London Councils therefore broadly welcomes the London Development Agency’s recent proposals on this issue. In particular, clarity should be provided regarding the relationship of the London Development Agency’s proposed London Housing Company to the powers and duties of the Homes and Communities Agency. In what is already a complex and challenging environment we would not wish to see unnecessary duplication of effort at public expense or any development which would serve to undermine the consensus enjoyed between boroughs on housing-related matters. Equally, any form of pan-London Housing Company should still allow for a high degree of local borough control.

London Councils proposes that the Greater London Authority works with London boroughs and the London Development Agency to oversee the development and management of a pan-London Housing Company, which appropriately meets the strategic requirements of London local government. Devolution

The Devolution of Housing Investment Decisions to London Boroughs

22. Against the background of an increased focus on the benefits of local devolution, an impetus to do more with less and to tailor local services to the demands of local people, the Mayor’s aspiration to devolve housing investment and investment decision-making powers to London boroughs is to be welcomed.

23. Clearly, much of the detail which underpins these proposals has yet to be established and, going forward, we recognise that boroughs have a significant role to play in defining the degree of devolution they would wish to see. However, in so far as it is appropriate to offer comment on the general principles of devolved housing delivery architecture for London, we would wish to highlight the following.

24. First, whatever the outcome of discussions regarding the detail of devolution it remains paramount that London boroughs need to be given the freedom to get on and deliver. Local authorities have spent a long time arguing for increased financial freedom and have long made the case that as the strategic place-shaper for an area, they are best placed to deliver for their residents. Furthermore, local authorities are some of the most scrutinized institutions in the public sector, democratically accountable to local residents and with an enviable reputation for fiscal prudence. As such, any proposed system of devolution needs to recognise that only the lightest form of additional regulation is likely to be appropriate, that only the highest level of strategic target is likely to encourage local innovation and success.

25. Second, in agreeing the goals of a devolved system, London boroughs need to have a clear role in defining how success is measured and in determining how the rewards of that success might be captured locally and regionally. Genuine devolution to the local level offers up the prospect of significant benefits, possibilities which go beyond questions relating to economies of scale or the delivery of additional affordable homes. If there is to be a devolution of housing investment powers, then we will need to be clear from the outset why such a course of action is envisaged, what level of support is likely to be available to boroughs willing to work with the Mayor in this manner.

26. Third, through the City Charter the Mayor and London boroughs have demonstrated their capacity to work side-by-side in tackling the strategic challenges of the capital. In moving towards a devolved system of housing delivery we must ensure that local communities are fully consulted and any arrangements are both transparent and accountable at all levels of Government. Devolution must be seen as a partnership between equals, a move informed by the principles of subsidiarity and not an attempt to shift the balance of responsibility for achieving challenging housing delivery targets in uncertain times.

London Councils proposes that the Greater London Authority works with the Homes and Communities Agency and London boroughs to establish a ‘Devolution Commission’ on housing investment and governance. This commission would be charged with developing a suitable model for devolving housing investment and investment decision-making powers in London and would inform, at a strategic level, the principles of any individual borough contracts. Housing Association Rationalisation

27. The housing association sector clearly stands at a cross-road. The collapse of the cross-subsidy model of housing delivery, the resultant growth in required social housing grant rates and the challenges posed by Government’s rent restructuring regime in a low inflation context pose significant challenges to the status quo. Against this background, the creation of the Tenants Services Authority as the regulator of social housing providers raises the possibility of radical reform and the occasion to address at least some of these challenges.

28. London Councils has worked closely with boroughs and the Tenants Services Authority to establish an appropriate regulatory framework and to explore the economic case for housing association rationalisation. From our experience we believe that policy developments in this area are likely to require a high degree of sensitivity and will necessarily entail detailed negotiations between London boroughs, London Councils, housing associations and the Tenants Services Authority. Whilst we welcome the Mayor’s enthusiasm for discussion, we would caution against unilateralism.

London Councils proposes that any reform of the housing association sector or negotiations on this topic orchestrated on behalf of London by the Mayor are co-ordinated with London boroughs.

Tackling Homelessness

29. London Councils fully supports the Mayor’s commitment to halve the number of households in temporary accommodation by 2010 and to end rough sleeping by 2012. We await with interest the initial findings of the Rough Sleeping Delivery Board and look forward to playing our part in implementing its recommendations. That said, we are concerned that simply restating the desire for London boroughs to reduce their use of temporary accommodation does little to assist those local authorities facing significant delivery challenges. It is almost certain that some boroughs will not be able to meet the Government’s target in this regard and we believe that a more appropriate way forward would be to look at how a rebased goal might be established in line with current trajectories.

30. We believe that a useful means of tackling this challenge would be to allow households in long-term, settled ‘temporary’ accommodation (two years plus) to be counted against the achievement of the temporary accommodation target. We would encourage the Mayor to work with London Councils and London boroughs to implement this position.

London Councils proposes the Greater London Authority work with us to develop an appropriate solution in light of the fact that some boroughs are unlikely to meet the target to halve their use of temporary accommodation by 2010. In particular, we propose joint-lobbying around the use of temporary to settled schemes and a move towards a monitoring regime better suited to the practical challenges of reducing the use of temporary accommodation. Design

The Mayor's Housing Design Guide

31. London Councils is encouraged by the Mayor’s production of a Housing Design Guide for London. We fully recognise that the economic crisis and resulting state of public finances means that, more than ever, public resources should only be spent on delivering housing schemes which exemplify the very highest quality. We also firmly believe that people deserve decent, safe homes, of a size and quality that reflects the importance housing has in defining so many elements of a successful and sustainable life. As such, we see as vital, the need to capture and codify those design elements which contribute towards achieving the desired standards.

32. In setting standards relating to larger dwelling sizes and in proposing a preclusion against single-aspect buildings, we recognise that there is the potential for increased costs which may impact on the ability of developers to supply new properties at a price the market can sustain. It would be an invidious position if London was faced with a choice between the supply of a smaller number of high-cost, high-quality homes and a larger number of lower-cost, lower-quality homes. London Councils supports the decision to introduce the standards and principles contained within the Mayor's Housing Design Guide for all affordable housing. It would also expect to see a public discussion regarding the implementation of these design standards for the private sector as part of the examination in public of the London Plan. However, in recognition of the role local authorities have as the responsible place-shaper for an area and in light of feedback from private sector developers looking to innovate in a challenging economic context, we propose that the Mayor create provision for certain aspects of the Design Guide to be waived in exceptional circumstances. Essentially, we would see this as analogous to previous guidance relating to site scale and the requirement to provide affordable housing. We believe that this would provide the correct balance between higher-standards and deliverability.

Beyond the Decent Homes Standard

33. London Councils would agree that the current Decent Homes Standard lacks many elements, particularly relating to thermal efficiency, security and environmental quality, which might be considered crucial components of a ‘decent home’. We have previously worked with the Greater London Authority and London boroughs to define what might constitute an appropriate successor standard and to explore how this standard might be funded. Clearly, this latter concern is a key consideration: the Decent Homes Standard entailed billions of pounds of Government investment and, at least initially, improving on this standard is likely to be similarly resource intensive. Beyond the actual cost, there is also a question relating to where this cost should fall and the extent to which compliance might be considered mandatory. The lessons of implementing Code for Sustainable Homes level four, five and six for new build housing may be helpful in this regard.

34. The recent challenge relating to the likely delay of decent homes funding to Arms Length Management Organisations yet to achieve two stars provides an important lesson and perhaps a way forward in this regard. A long-term sustainable funding model for local authority homes needs to take a full account of stock condition, previous levels of investment and the emerging regulatory framework of the Tenants Services Authority. Through joint working with boroughs and the Homes and Communities Agency, it is possible that the Greater London Authority and London Councils will be able to develop a proposal that fully takes account of these pressures and lobbies Government accordingly.

London Councils proposes that the Greater London Authority commit to working with London boroughs and the Homes and Communities Agency to explore a comprehensive model for funding the improvement of stock condition beyond the decent homes standard. We also propose that the Mayor makes a formal commitment to achieving and maintaining the current decent homes standard across all social housing in London.